NEW YORK ? Bermuda, an offshore reinsurance market, is likely to continue snagging companies away from the London market and attracting new business, say those already based on the Island, but high costs threaten on the horizon.

London-based insurers Hiscox and Omega Underwriting in the last week said they were relocating to Bermuda, citing tax advantages over operating in the UK, where insurers typically pay a 30 percent tax rate.

Bermuda does not have an income tax, but does levy a payroll tax on workers, import duties and company fees.

The mid-Atlantic British territory in the last year has attracted about $20 billion in new capital, boosting established company?s balance sheets and backing new ventures.

?Bermuda is the domicile of first resort when investors think about setting up companies,? said Chris O?Kane, chief executive of Bermuda insurer Aspen Insurance Holdings, on a panel at yesterday?s Fox-Pitt Kelton insurance conference. O?Kane and other executives on the panel said Bermuda?s tax advantage will slip if costs keep rising.

O?Kane, a veteran of the London market, joined Aspen in 2002 as it was being formed by investors including Wellington Underwriting Plc, a large Lloyd?s of London insurer, and private equity firms Blackstone Group, and Credit Suisse First Boston Private Equity.

?It is almost as if there were no other place to go,? said O?Kane.

?But that isn?t true, there are other places to go.?

Dublin, Cayman, Barbados, Monaco, Switzerland, and Gibraltar all could one day rival Bermuda, he said. Bermuda does offer other advantages, O?Kane said, including its pool of insurance expertise. Keith Hynes, CEO of Bermuda insurer Max Re Capital Holdings, said in years past US insurers had been shifting to Bermuda until Capitol Hill changed regulations to stem the tax advantages. More recently, Congress cut the amount of tax that US workers living abroad can write off as housing expenses.

UK insurers, led by Lloyd?s of London chairman Peter Levene, are lobbying the British government to get a reduction to its tax rate, citing the need to be able to compete against rivals in lower tax domiciles, like Bermuda.

?If London had Bermuda?s tax advantages there would be little advantage left in Bermuda,? said O?Kane, though he does not hold out much hope for the reforms.

?It is unlikely to happen ... the whole (UK) tax culture is more complicated than insurance.?

Hynes said non-income taxes, and regulatory fees, were also creeping up in Bermuda, adding to its already expensive costs.

High living costs, including rents that typically range from $10,000 to $15,000 a month, for which the employers tend to foot the bill, may eventually drive insurers and reinsurers to look elsewhere, O?Kane said.